Reaffirms outlook for 2002 and 2003
First Quarter Highlights:- Reported net earnings of $602 million, or $0.75 per diluted share, excluding non-recurring items and adoption of new accounting standard (SFAS 142) – Achieved operating margins of 7.4 percent, excluding non-recurring items – Delivered 110 commercial jet airplanes; achieved strong Commercial Airplanes operating results – Selected to negotiate with the U.S. Air Force for the 767 tanker program – Selected as lead system integrator for U.S. Army Future Combat Systems program – Continued prudent growth of customer financing portfolio – Installed first Connexion by Boeing(SM) system on a commercial airliner
Summary Financial Results: (In millions, except per share data) First Quarter % 2002 2001 Change
Revenues $13,821 $13,293 4%
Before cumulative change in accounting* Net earnings $578 $1,236 Adjust for Non-Recurring charges/(gains), net $24 ($475) Reported Earnings before Non-Recurring $602 $761 (21%)
Earnings per share (diluted) $0.72 $1.45 Adjust for Non-Recurring charges/(gains), net $0.03 ($0.56) Reported EPS before Non-Recurring $0.75 $0.89 (16%) Diluted Shares for EPS 807.8 852.2
*Effective 1/1/02, Boeing adopted SFAS 142 and recognized a $1.8 billion non-cash, after-tax charge as a “Cumulative effect of accounting change, net of taxes” in its Statement of Operations.
The Boeing Company
reported first quarter net earnings of $602 million, or $0.75 per share, on
$13.8 billion of revenues, excluding non-recurring items and the impact of
adopting a new accounting standard related to goodwill.
During the same
period last year, the company reported net earnings before non-recurring items
of $761 million, or $0.89 per share on $13.3 billion of revenue.
Boeing’s financial results include the impact of stock compensation
expenses which reduced first quarter earnings per share by $0.13 and
$0.02 during the same period last year.
When stock compensation expenses are
excluded, along with non-recurring items and changes in accounting, earnings
per share totaled $0.88 in the first quarter of 2002 compared with
$0.91 per share in 2001.
Excluding non-recurring items, operating earnings and margins for the
period totaled $1.0 billion and 7.4 percent, respectively, versus $1.2 billion
and 9.2 percent during the first quarter of 2001.
Current quarter results reflect higher revenues at Military Aircraft and
Missile Systems, as well as at Boeing Capital Corporation, and generally
strong operating performance across the company’s core aerospace and finance
businesses.
However, period results were impacted by increases in commercial
satellite program costs and continued softness in the commercial satellite
marketplace.
“Our first quarter financials reflect strong performance at our Commercial
Airplanes and our Military Aircraft and Missile Systems businesses, as well as
continued prudent, profitable growth at Boeing Capital Corporation,” said Phil
Condit, Boeing chairman and chief executive officer.
“Our Space and
Communications team continues to execute on the vast majority of its programs,
and is taking significant action to resolve commercial satellite production
issues that affected first quarter results.
Commercial Airplanes continues to
aggressively implement lean manufacturing to maximize efficiency through the
down-cycle, and Military Aircraft and Missile Systems again turned in
excellent program performance.”
The company recognized three non-recurring items during the quarter.
These include, on an after-tax basis:
1) a $15 million non-recurring benefit
related to the F-15 program; 2) a $24 million non-recurring charge related to
decreased valuations of commercial aircraft related to the events of Sept. 11;
and, 3) a $15 million charge recognized on a long-held equity investment.
Net
earnings, before changes in accounting and including these non-recurring
items, totaled $578 million, or $0.72 per share.
As previously announced, during the quarter the company adopted the
Statement of Financial Accounting Standards No. 142 effective Jan. 1, 2002.
As a result, the company recognized a $1.8 billion non-cash, after-tax charge
as a “cumulative effect of accounting change, net of taxes” in the attached
Statement of Operations.
A supplementary table at the end of this release
summarizes the impact of non-recurring items and the goodwill accounting
change on quarterly results.
Total backlog at the end of the quarter was $131.1 billion compared with
$134.1 billion at the end of 2001.
Contractually committed backlog was up to
$110.2 billion, compared with $106.6 billion at year end.
The company generated $174 million of free cash flow (operating cash flow
less capital expenditures) in the quarter.
Quarterly free cash was impacted
by movement of payment timing on certain government contracts to the second
quarter.
Ending cash and short-term investment balances totaled $541 million.
Consolidated first quarter debt totaled $12.9 billion compared with
$12.3 billion at the end of 2001, reflecting continued growth at Boeing
Capital Corporation.
Debt attributable to The Boeing Company at the end of
the quarter totaled $4.4 billion, essentially unchanged, while Boeing Capital
Corporation debt increased to $7.9 billion.
Non-recourse customer financing
obligations totaled about $0.6 billion.
Since 1998, Boeing has recognized the impact of its stock compensation
plans on company earnings.
During the first quarter, the increase in the
company’s stock price raised pre-tax general and administrative expenses
attributable to deferred stock compensation by $62 million, decreasing
earnings per share $0.05.
General and administrative expenses will continue
to fluctuate with the company’s stock price.
Pre-tax expenses associated with
ongoing share-based plans totaled $104 million, reducing earnings per share an
additional $0.08, for a total EPS reduction of $0.13.
Commercial Airplanes:
First quarter Commercial Airplanes segment revenues
totaled $8.3 billion, essentially unchanged compared to the first three months
of 2001.
Commercial Airplanes delivered 110 new jet airplanes during the
quarter compared to 122 during the first quarter of 2001.
Segment operating
earnings and margins, excluding the non-recurring item, totaled $1.0 billion
and 12.1 percent, respectively, compared to $860 million and 10.2 percent
during the first quarter of 2001.
Segment margin performance was positively
impacted by continued operating improvements, strong cost performance in
recently completed production blocks, and delivery mix.
During the quarter, Commercial Airplanes further refined the estimated
financial impacts directly attributable to the events of Sept. 11, 2001, and
recognized a $34 million pre-tax, non-cash charge primarily due to decreased
used aircraft valuations.
Segment earnings and margins for the quarter,
including this charge, totaled $973 million and 11.7 percent, respectively.
Commercial Airplanes continued to take aggressive actions to improve
operating efficiency during the current market downturn and beyond.
This
includes achieving fully operational moving line production on the high-volume
737 program, which reflects significant improvement in manufacturing processes
and related supply chain management.
Commercial Airplanes remains on track to
achieve an orderly reduction of production rates by about one-half of 2001
levels by mid-2002.
Other major events during the quarter included securing,
from Ryanair, the largest-ever single firm order (100) for Next-Generation
737 aircraft.
Commercial Airplanes received 120 gross orders during the quarter.
Contractual backlog at quarter-end totaled $71.6 billion, compared with
$75.9 billion at the end of 2001.
Military Aircraft and Missile Systems:
Military Aircraft and Missile
Systems revenues for first quarter increased 22 percent to $3.0 billion
compared with $2.4 billion a year ago.
Aircraft, rotorcraft, and tactical
weapons program deliveries were all higher, as were revenues from military
aerospace support.
Operating performance continued to be strong as segment
earnings and operating margins, excluding the benefit of a non-recurring item,
totaled $339 million and 11.4 percent, respectively.
This compares to segment
earnings and operating margins of $246 million and 10.1 percent during the
first quarter of 2001.
During the quarter, Military Aircraft and Missile Systems recognized a
non-recurring $24 million benefit to operating profits as a result of
continuing supplier termination negotiations on the F-15E program.
Segment
earnings and margins for the quarter, including this adjustment, totaled
$363 million and 12.2 percent, respectively.
Military Aircraft and Missile Systems took steps toward securing
significant growth opportunities during the quarter.
This includes additional
Joint Direct Attack Munition orders, increasing production rates and
accelerating deliveries in support of growing national security needs.
In
late March, the Korean Ministry of National Defense announced that Boeing’s
F-15K would proceed to the evaluation’s second phase of the F-X competition.
The U.S. Air Force also selected Boeing to proceed in negotiations on the 767
tanker program.
Tanker negotiations are currently expected to be complete
this summer.
Contractual backlog at the end of the quarter totaled $22.5 billion
compared with $17.6 billion at the end of 2001.
Space and Communications:
Space and Communications reported first quarter
revenues of $2.3 billion, a four percent increase over the same period in
2001.
The year-over-year revenue reflects an increase in missile defense and
integrated battlespace activities, partially offset by lower revenues in
commercial satellites.
First quarter operating earnings and margins totaled
$42 million and 1.8 percent, respectively, versus $84 million and 3.7 percent
during the first quarter of 2001.
Margin reduction compared to the first
quarter of 2001 was primarily driven by program performance on commercial
satellite programs.
The remainder of the business recognized margin
improvement compared with the first quarter of 2001.
The commercial satellite business was reorganized to enhance efficiency
and competitiveness by infusing Boeing lean manufacturing and quality
processes into satellite manufacturing activities. This action includes
facilities consolidation, workforce reductions, implementation of integrated
product teams and streamlining of design and production.
Space and
Communications is continuing to assess the Boeing Satellite Systems program
outlook, and expects the reorganization to improve commercial satellite
manufacturing performance by year-end despite the current commercial satellite
market downturn.
Major events during the quarter included a successful Ground-based
Midcourse Defense program integrated flight test.
Space and Communications
also assumed the Systems Integration Lead for the new national industry team
established by the U.S. Missile Defense Agency.
In addition, the unit
achieved a significant milestone in its integrated battlespace growth strategy
by being selected as prime contractor to develop the U.S. Army’s Future Combat
Systems program.
Contractual backlog at the end of the quarter totaled $16.1 billion
compared with $13.1 billion at the end of 2001.
Boeing Capital Corporation:
Boeing Capital Corporation new volume in the
first quarter of 2002 totaled $1.1 billion, up from $420 million in the first
quarter of 2001.
The higher volumes in the latest two quarters reflect Boeing
Capital’s ability to prudently meet the increased need for financing among the
major U.S. airlines in the post-Sept. 11 environment.
Volume during the
remainder of 2002 is expected to moderate as these airlines’ borrowing needs
diminish.
Boeing Capital’s financing assets totaled $9.9 billion at the end of the
first quarter, up from $9.0 billion at year-end 2001 and $5.5 billion at the
end of the first quarter of 2001.
First quarter revenues increased 42 percent
to $228 million from $161 million in the first quarter of 2001, consistent
with the significant growth in financing assets in the prevailing lower
interest rate environment.
Pre-tax earnings climbed to $66 million in the
first quarter of 2002, compared with $40 million in the first quarter of 2001.
Essentially all Boeing customer financing assets are now consolidated at
Boeing Capital.
Consequently, the segment formerly identified as Customer and
Commercial Financing has been reclassified starting this quarter as Boeing
Capital Corporation.
Other Segments: During the quarter, Connexion by Boeing(SM) completed the
first system installation onboard a commercial airliner.
Following technical
testing, Lufthansa will begin consumer service trials onboard the 747-400 in
late 2002.
In addition, Connexion by Boeing signed a contract to equip four
aircraft used by senior U.S. government officials and made strong progress
toward certification of service hardware.
Air Traffic Management continued to generate interest both domestically
and internationally with its approach to develop the next generation air
traffic management system.
During the quarter, a series of Working Together
Team meetings with domestic industry stakeholders was completed, resulting in
the development and public release of a System Performance Requirements
Document.
A follow-on European Working Together Team is being established.
Outlook: The outlook for 2002 and guidance for 2003, shown below, remain
consistent with that previously provided.
“We expect our aerospace and finance businesses to perform well this
year,” said Senior Vice President and Chief Financial Officer Mike Sears.
“Commercial Airplanes is well positioned to continue performing profitably at
lower production and delivery levels, and Military Aircraft and Missile
Systems is poised to again realize solid double-digit margins,” he added.
“Space and Communications is focused on delivering strong performance across
its program base, with an emphasis on improved profitability in commercial
satellites, and Boeing Capital is positioned for prudent, profitable growth.”
Commercial Airplanes remains on track to resize for lower airplane
delivery levels during the second half of 2002.
Planned employment reductions
are on schedule to reach approximately 30,000 by mid-year.
Segment operating
margins are expected to moderate somewhat from levels achieved during the
first quarter as the company continues to lower production rates.
The outlook for Commercial Airplanes deliveries remains unchanged at
approximately 380 airplanes in 2002 and between 275 and 300 airplanes in 2003.
The delivery forecast is essentially sold out for 2002 and is now more than
80 percent sold for 2003 at the lower end of the range.
The outlook for
single-aisle airplanes remains solid.
However, the market for twin-aisle
airplanes remains a near-term watch item and has the potential to impact the
mix of 2003 deliveries.
Space and Communications’ missile defense and integrated battlespace
programs remain key growth areas during the outlook period.
Keys to achieving
full year-over-year unit earnings and margin improvements in 2002 include
commercial satellite manufacturing profit recovery, as well as Delta IV
successful first flight and initial market acceptance.
Revenue growth is also
planned from Military Aircraft and Missile Systems’ aerospace support programs
and increased deliveries of tactical fighters, rotorcraft and transport
aircraft under multi-year procurements.
Revenue guidance for 2002 remains unchanged at +/- $54 billion.
For
2003, revenues are anticipated to be +/- $52 billion as growth in the
company’s space and defense businesses partially offset revenue declines from
fewer commercial airplane deliveries.
Operating margin guidance for 2002
remains unchanged at +/-8.25 percent, and the company intends to hold 2003
margins at +/- 8.25 percent as well.
Free cash flow guidance for 2002 remains between $2.5 billion and
$3.0 billion.
Free cash flow guidance for 2003 is unchanged at greater than
$3 billion.
Financial Outlook 2002 2003
Revenue (in billions) $54 +/- $52 +/-
Operating margins (%) 8.25% +/- 8.25% +/-
Free cash flow (in billions) $2.5 - $3.0 >$3.0
Research and development during the guidance period is expected to remain
between 3.0 and 3.5 percent of sales, but near the lower end of the range.
Summary of Non-Recurring Items: A summary of non-recurring impacts to the
company’s financial results is provided below:
2002 and 2001 NRE and Accounting
Change Impacts To Net Earnings - Year to Date
Gains/(Charges) - Millions of Dollars After Tax
2002 2001
First Quarter
F-15E Program Settlement $ 15 $343 R&D Tax Settlement
Used Aircraft Valuation* $(24) $132 Interest on R&D Tax
Settlement
Loss on Long-Held Equity
Investment $(15)
Net Earnings Impact $(24) $475
Diluted EPS Impact $(0.03) $0.56
Change In Accounting
SFAS 142 (Goodwill) $ (1,827) $1 SFAS 133 (Derivatives)
Diluted EPS Impact $(2.26) $0.00
* Sept-11 related event identified in Statement of Operations per EITF
01-10: Accounting for the impact of the Terrorist Attacks of
Sept. 11, 2001.
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements in this release contain “forward looking” information
that involves risk and uncertainty, including projections for new products,
deliveries, realization of technical and market benefits from acquisitions,
revenues, operating margins, free cash flow, taxes, research and development
expenses, prospects for delivery stream recovery in commercial aircraft, and
other trend projections. This forward-looking information is based upon a
number of assumptions including assumptions regarding global economic,
passenger and freight growth; current and future markets for the Company’s
products and services; demand for the Company’s products and services;
performance of internal plans, including, without limitation, plans for
productivity gains, reductions in cycle time and improvements in design
processes, production processes, program performance, benefits from
reorganizations, and asset utilization; product performance; customer
financing; customer, supplier and subcontractor performance; customer model
selections; favorable outcomes of certain pending sales campaigns and U. S.
and foreign government procurement actions; including the timing of
procurement of tankers, supplier contract negotiations; price escalation;
government policies and actions; successful negotiation of contracts with the
Company’s labor unions; regulatory approvals; and successful execution of
acquisition and divestiture plans; and the assessment of the impact of the
attacks of September 11, 2001.
Actual results and future trends may differ
materially depending on a variety of factors, including the Company’s
successful execution of internal performance plans, including continued
research and development, production rate increases and decreases
(particularly with respect to wide body production), production system
initiatives, timing of product deliveries and launches, supplier contract
negotiations, asset management plans, acquisition and divestiture plans,
procurement plans, credit rating agency assessments, and other cost-reduction
efforts; the actual outcomes of certain pending sales campaigns and U. S. and
foreign government procurement activities; including the timing of procurement
of tankers, acceptance of new products and services; product performance
risks;
the cyclical nature of some of the Company’s businesses; volatility of
the market for certain products and services; domestic and international
competition in the defense, space and commercial areas; continued integration
of acquired businesses; uncertainties associated with regulatory
certifications of the Company’s commercial aircraft by the U.S. Government and
foreign governments; other regulatory uncertainties; collective bargaining
labor disputes; performance issues with key suppliers, subcontractors and
customers; governmental export and import policies; factors that result in
significant and prolonged disruption to air travel worldwide; any additional
impacts from the attacks of September 11, 2001; global trade policies;
worldwide political stability; domestic and international economic conditions;
price escalation trends; the outcome of political and legal processes,
including uncertainty regarding government funding of certain programs;
changing priorities or reductions in the U.S. Government or foreign government
defense and space budgets; termination of government contracts due to
unilateral government action or failure to perform; legal, financial and
governmental risks related to international transactions; legal proceedings;
and other economic, political and technological risks and uncertainties.
Additional information regarding these factors is contained in the Company’s
SEC filings, including, without limitation, the Company’s Annual Report on
Form 10_K for the year ended 2001 and the 10Q’s for the quarters ended 31
March 2001, 30 June 2001 and 30 September 2001.
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions except per share data)
Three months ended
March 31
2002 2001
Sales and other operating revenues $13,821 $13,293
Cost of products and services 11,571 11,070
2,250 2,223
Equity in income from joint ventures 11 22
General and administrative expense 672 523
Research and development expense 459 422
Share-based plans expense 104 82
Special charges due to events of
September 11, 2001 34
Earnings from operations 992 1,218
Other income, principally interest 12 235
Interest and debt expense (172) (148)
Earnings before income taxes 832 1,305
Income taxes 254 69
Net earnings before cumulative effect
of accounting change 578 1,236
Cumulative effect of accounting
change, net of taxes (1,827) 1
Net earnings (loss) $(1,249) $1,237
Basic earnings per share before
cumulative effect of accounting change $0.72 $1.48
Cumulative effect of accounting
change, net of taxes (2.28)
Basic earnings (loss) per share $(1.56) $1.48
Diluted earnings per share before
cumulative effect of accounting change $0.72 $1.45
Cumulative effect of accounting
change, net of taxes (2.26)
Diluted earnings (loss) per share $(1.54) $1.45
Cash dividends paid per share $0.17 $0.17
Average diluted shares (millions) 807.8 852.2
Note: All references to earnings per share in the text of this press
release refer to diluted earnings per share.
The Boeing Company and Subsidiaries
Consolidated Statements of Position
(Dollars in millions except per share data)
March 31 December 31
2002 2001
(Unaudited)
Assets
Cash and cash equivalents $541 $633
Accounts receivable 5,734 5,156
Current portion of customer and
commercial financing 1,107 1,053
Deferred income taxes 2,543 2,444
Inventories, net of advances and
progress billings 6,082 6,920
Total current assets 16,007 16,206
Customer and commercial financing 9,991 9,345
Property, plant and equipment, net 8,452 8,459
Goodwill and acquired intangibles, net 3,895 6,443
Prepaid pension expense 5,996 5,838
Other assets 2,152 2,052
$46,493 $48,343
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $13,649 $13,872
Advances in excess of related costs 3,572 4,306
Income taxes payable 385 909
Short-term debt and current portion
of long-term debt 1,551 1,399
Total current liabilities 19,157 20,486
Deferred income taxes 236 177
Accrued retiree health care 5,420 5,367
Deferred lease income 602 622
Long-term debt 11,325 10,866
Shareholders' equity:
Common shares, par value $5.00 -
1,200,000,000 shares authorized;
Shares issued _ 1,011,870,159
and 1,011,870,159 5,059 5,059
Additional paid-in capital 2,421 1,975
Treasury shares, at cost _
173,164,773 and 174,289,720 (8,454) (8,509)
Retained earnings 13,091 14,340
Accumulated other comprehensive income (446) (485)
Unearned compensation (2) (3)
ShareValue Trust shares _
39,832,429 and 39,691,015 (1,916) (1,552)
Total shareholders' equity 9,753 10,825
$46,493 $48,343
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
(Dollars in millions) March 31
2002 2001
Cash flows - operating activities:
Net earnings $(1,249) $1,237
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Cumulative effect of
accounting change, net 1,827 (1)
Share-based plans 104 82
Depreciation 294 315
Amortization of intangibles 28 69
Customer and commercial
financing valuation
provision 8 4
Changes in assets and
liabilities _
Accounts receivable (563) 404
Inventories, net of
advances and progress
billings 838 (1,227)
Accounts payable and other
liabilities (83) 343
Advances in excess of
related costs (734) 426
Income taxes payable and
deferred 98 (128)
Deferred lease income (20)
Prepaid pension expense (158) (249)
Accrued retiree health
care 53 53
Other (38) (238)
Net cash provided by
operating activities 405 1,090
Cash flows - investing activities:
Customer financing and properties
on lease, additions (1,154) (470)
Customer financing and properties
on lease, reductions 390 264
Property, plant and equipment,
net additions (231) (240)
Proceeds from dispositions 68
Net cash used by
investing activities (995) (378)
Cash flows - financing activities:
New borrowings 754 850
Debt repayments (148) (770)
Common shares purchased (131)
Stock options exercised, other 34 29
Dividends paid (142) (148)
Net cash provided
(used) by financing
activities 498 (170)
Net increase (decrease) in cash and
cash equivalents (92) 542
Cash and cash equivalents at
beginning of year 633 1,010
Cash and cash equivalents at end of
1st quarter $541 $1,552
The Boeing Company and Subsidiaries
Business Segment Data
(Unaudited)
(Dollars in millions) Three months ended
March 31
2002 2001
Revenues:
Commercial Airplanes $8,313 $8,443
Military Aircraft and Missile Systems 2,972 2,427
Space and Communications 2,332 2,246
Boeing Capital Corporation 228 161
Other 126 116
Accounting differences / eliminations (150) (100)
Operating revenues $13,821 $13,293
Earnings from operations:
Commercial Airplanes $973 $860
Military Aircraft and Missile Systems 363 246
Space and Communications 42 84
Boeing Capital Corporation 156 113
Other (52) (22)
Accounting differences / eliminations (265) 25
Share-based plans (104) (82)
Unallocated expense (121) (6)
Earnings from operations $992 $1,218
Other income, principally interest 12 235
Interest and debt expense
Boeing Capital Corporation (90) (73)
Other (82) (75)
Earnings before income taxes 832 1,305
Income Taxes 254 69
Net earnings before cumulative
effect of accounting change $578 $1,236
Effective income tax rate 30.5% 5.3%
Research and development:
Commercial Airplanes $223 $195
Military Aircraft and Missile Systems 82 53
Space and Communications 128 123
Other 26 51
Total research and development expense $459 $422
The Boeing Company and Subsidiaries
Operating and Financial Data
Deliveries 1st Quarter
Commercial Airplanes 2002 2001
717 3 7 (1)
737 Next-Generation 59 * (1) 72 *
747 8 7
757 12 8
767 12 10
777 16 16
MD-11 _ 2
Total 110 122
Military Aircraft and Missile Systems
C-17 3 2
F/A-18 E/F 10 7
T-45TS 2 4
CH-47 2 2
Apache (New Builds) 5 2
Space and Communications
Delta II 1 _
Satellites 3 1
* Includes one intercompany C-40 737 aircraft
Note: Commercial Airplanes deliveries by model include deliveries under
operating lease, which are identified by parentheses.
Mar 31 Dec. 31
Contractual backlog (Dollars in billions) 2002 2001
Commercial Airplanes $71.6 $75.9
Military Aircraft and Missile Systems 22.5 17.6
Space and Communications 16.1 13.1
Total contractual backlog $110.2 $106.6
Unobligated backlog $20.9 $27.5
Workforce 178,000 188,000
